Foreign Gas Companies in Bolivia Face Sharply Higher Taxes

By JUAN FORERO

Published: May 18, 2005

President Carlos Mesa's government allowed passage of a bill on Tuesday that will sharply raise taxes on foreign energy companies, a move officials hope will defuse mounting protests from groups that want Bolivia to squeeze the big multinationals that have flocked to this poor country.

But the decision by Mr. Mesa, who has bowed repeatedly to demands from protesters in his 19-month term, appeared to placate few. Foreign oil companies say the law is financially onerous and will prompt them to cut back on investments, and the influential Movement to Socialism Party, led by Evo Morales, has promised more protests, contending the law is too soft on the companies.

Thousands of Indians and miners continued to march from several communities in the highlands toward the capital, some of their leaders promising to take over Congress unless a tougher law is approved.

''We are going to fight against this law,'' Dionisio Nu? a congressman with Movement to Socialism, said outside Congress. ''The marches have to continue because in Congress, not all the senators and deputies defend the people. Sometimes they defend the multinationals.''

By permitting a deadline to pass requiring him to approve or reject the law, Mr. Mesa turned the legislation back to Congress, where the senate president, Hormando Vaca Diez, signed it late Tuesday afternoon.

Mr. Mesa's decision surprised the country because after Congress approved the law on May 5, the government said it would be economically disastrous for Bolivia, which is heavily dependent on foreign investment. The law adds a 32 percent tax to an 18 percent royalty that is already in effect, and requires energy companies to sign new contracts with the government.

Mr. Mesa, a historian and former journalist who took office after President Gonzalo Sanchez de Lozada was toppled by protesters angry at his energy policies, offered little explanation for his decision, telling Bolivians in a televised speech that ''there was no possibility that I would sign'' the law.

His chief of staff, Jos?alindo, told reporters that the president wanted to respect the will of Congress. ''Respecting that will, the president's decision is that this law is automatically approved,'' Mr. Galindo said.

In March, after Mr. Mesa threatened to resign in the face of protests, he pledged to push a ''reasonable and acceptable'' energy bill that offered ''good conditions for Bolivia and for the international community.'' But with little support in Congress, and a range of groups promising to stage more protests, Mr. Mesa bowed once more to the will of the streets.

The decision immediately put in danger $3.5 billion invested in Bolivia since the late 1990's by Petrobras of Brazil, British Gas, Repsol of Spain and Total of France -- all of them lured here by Latin America's second-largest natural gas deposits.

With Bolivia gripped by five years of antiglobalization protests, the initial promise has waned and oil and gas investments have fallen precipitously, to less than $200 million last year from $608 million in 1998. Big plans, like a project to export natural gas from landlocked Bolivia to the United States via a pipeline to the Chilean coast, are dead.

Companies ''have found gas reserves but have not had the conditions to even think of developing them,'' said Carlos Alberto L?, a former vice minister for energy who now consults for energy firms. ''It is difficult to see how this sector will grow and develop.''

The president of Repsol in Bolivia, Julio Gavito, recently told the newspaper La Raz?hat the new legislation would ''force us to abandon many gas fields.''

But many indigenous and labor groups want the government to go further, expropriating the companies' assets without compensation. They believe multinationals have been plundering Bolivia's riches for years and now they want payback.

''We say yes to nationalization of the hydrocarbons,'' said Julio Pab?a leader of Fejuve, a leading antiglobalization group in the region.

Photo: Bolivian miners blocked a road yesterday to demand nationalization of energy companies. Years of protest have eroded foreign investment. (Photo by Noah Friedman-Rudovsky for The New York Times)